They Did Their Homework (800 Years of It)

http://www.nytimes.com/2010/07/04/business/economy/04econ.html?pagewanted=1&hpw

by drallison • 16 years ago

61 21 16 years ago

drallison• 16 years ago

<snip> ... a pair of financial sleuths, Ms. Reinhart and her collaborator from Harvard, Kenneth S. Rogoff, have spent years investigating wreckage scattered across documents from nearly a millennium of economic crises and collapses. They have wandered the basements of rare-book libraries, riffled through monks’ yellowed journals and begged central banks worldwide for centuries-old debt records. And they have manually entered their findings, digit by digit, into one of the biggest spreadsheets you’ve ever seen.

Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. </snip>

RiderOfGiraffes• 16 years ago

Single page: http://www.nytimes.com/2010/07/04/business/economy/04econ.ht...

Estragon• 16 years ago

It appears that a version of the book is available for free here: http://www.nber.org/papers/w13882

trebor• 16 years ago

But only for those at "subscribing institutions". I don't qualify, so I guess I have to see if the library has it.

qq66• 16 years ago

I'm at a subscribing institution: http://www.scribd.com/doc/33887169/w13882

SkyMarshal2• 16 years ago

That's their paper, also available for free on the authors' websites. Not the book (http://press.princeton.edu/titles/8973.html).

Though having read the paper, I imagine the book is the same info with some redundancy (for persuasion) and filler thrown in.

SkyMarshal2• 16 years ago

This was a really cool study. More of Rogoff's papers on it and related to it here:

http://www.economics.harvard.edu/faculty/rogoff/Recent_Paper...

albertcardona• 16 years ago

“They say historians peak in their 50s, once they’ve accumulated enough knowledge and wisdom to know what to look for,” says Mr. Rogoff. “By contrast, economists seem to peak much earlier. It’s hard to find an important paper written by an economist after 40.”

Anybody has pointers to where this data comes from? What about other professions?

jallmann• 16 years ago

Mathematics. See the Fields Medal.

kasterma• 16 years ago

I belief the Fields Medal is not only given to people below 40 b/c there are no older people deserving; I belief it is given to younger people b/c they can most benefit from getting such recognition.

lkozma• 16 years ago

Well, Hardy said that mathematicians peak in their twenties or something like that (I can't find the exact quote), but there have been exceptions like Weierstrass for ex.

archgoon• 16 years ago

And Euler (e^pi+1=0 discovered when he was 43). And Hilbert (published the axioms of geometry when he was 37 and formulated the Hilbert Problems) And Newton (34 when published Principia). Grigori Perelman (40). Andrew Wiles (41 when proving fermat's last theorem). Michael Garey was in his 30's and Richard Karp was in his 40's when they published their papers on NP Completeness. Paul Erdős published continuosly throught his life (died at 86). Emmy Noether developed Noether's theorem when she was about thirty, and developed Ideal Theory when she was in her 40's.

Hardy's statement was not researched, or scientific. It'd be interesting to actually take papers, take the age of the authors, weight by citation rate, and give a better number of when mathematicians 'peak'.

mleonhard• 16 years ago

There's some data in "Why productivity fades with age: The crime–genius connection" by Satoshi Kanazawa:

http://personal.lse.ac.uk/Kanazawa/pdfs/JRP2003.pdf

russell• 16 years ago

I went over to Amazon to see what the reviews said. Some of them did a decent job of summarizing the salient points. The crises were characterized by real estate crashes followed by stock market crashes, followed by an average of 86% increase in public debt (sound familiar), followed by severe inflation. I guess that means in a few years my backbreaking mortgage can be paid from my Starbucks fund.

Unfortunately the authors dont give a prescription. Given that this one was fueled by hubris and institutional corruption with no political will to fix it, we are due for more in the future.

joe_the_user2• 16 years ago

Oh ho ho,

If Ken Rogoff knew the economy was in trouble, he did a good job of hiding that this 2007 interview: http://www.onpointradio.org/2007/11/wheres-the-economy-heade... (!!)

I don't know where the 2003 starting date came from. Perhaps they started a different book then and re-purposed it for the present events. Or perhaps he was hiding stuff in the 2007 interview (though I'd doubt it).

abstractbill• 16 years ago

He clearly states that he didn't know the economy was in trouble:

Still, its authors laugh when asked about the book’s opportune timing.

“We didn’t start the book thinking that, ‘Oh, in exactly seven years there will be a housing bust leading to a global financial crisis that will be the perfect environment in which to sell this giant book,’ ” says Mr. Rogoff. “But I suppose the way things work, we expected that whenever the book came out there would probably be some crisis or other to peg it to.”

They began the book around 2003, not long after Mr. Rogoff lured Ms. Reinhart back to the I.M.F. to serve as his deputy.

joe_the_user2• 16 years ago

Curses, foiled by skimming the article... still,

I would-up confusing the present Rogoff with the Rogoff of 2009, where in this interview, he talks about being angry towards those who were claiming the economy was in good shape.

http://www.businessinsider.com/henry-blodget-rogoff-the-wors...

Having already seen these two interviews, I've lost the slightest respect or credence for the fellow...

jboydyhacker• 16 years ago

--The book talks about the 18th -20th century versions of all the problems we face now--currency devaluation, fiat currencies, and excessive borrowing. While the book talks broadly about the last 800 years of "folly", most of the data is the last few hundred years or so simply because records were not as developed.

--It's really more of a statistical assay than it is a history book. There are several parts where they actually take a look at the history of the various defaults like a historian would and in my opinion these are the most valuable parts. By understanding the players and their motivations at a given point and time, you can apply the past to current events and somehow get a weighting of various probably outcomes for the current crisis. Instead, the book seems to focus on table after table and some of the data by its nature is going to be incomplete or incongruent.

--Just to add on to the point above-- while the genesis of every economic crisis is often novel, they usually end with the same kind of behaviors of fear and hording. Understanding how that unfolds in each crisis and how policy makers might prevent that behavior would be valuable to study. The most important parts of economics is "behavioral " economics. Understanding the wild spirits is half the battle.

---There is a lot of noise around these days about economists trying to be physicists with large econometric models trying to predict exactly what the economy is going to do. I remember my first stint as a government trade economist as we tried to use very complex models from the University of Maryland to predict the impact of trade agreements. I always thought this was all nonsense as human behavior is the ultimate driver and it's more akin to modeling the weather than how fast a bullet is going.

--While I love tables too, there were not a lot of good conclusions from the data. I wanted more hard and fast rules about when a crisis reaches a tipping point. In the end, despite mountains of data I don't feel like I was materially better armed to understand how a crisis will unfold after reading the book.

jacobolus• 16 years ago

> I wanted more hard and fast rules about when a crisis reaches a tipping point.

I bet everyone wishes we had some of these. It’s not at all clear to me that hard and fast rules are possible, or if they were, that the widespread knowledge therof wouldn’t invalidate them by changing the society/market.

They Did Their Homework (800 Years of It)

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